The Forgotten Credit Agency

Most everyone knows enough about credit scores (FICO) and their role in your personal finances. The Big 3 credit reporting agencies controlling your data and scores include Equifax, Experian, and Transunion. But how many of you know about their little brother, Innovis? Protecting yourself requires being as thorough as possible, partly by paying attention to all four agencies.

When you are setting out to increase your own security, begin by locating your own personal credit score. A good place to start is myfico.com, which is the standard bearer for credit scores. Yours can be obtained for no charge. Also, check out freecreditcheck.com for more information, as well as your own personal credit report.

Freezing your credit is an excellent safety precaution, in a world where there are bad guys lurking in every corner of the Internet. Freezing your credit assures you that no agency can make any changes or get your scores unless and until you authorize access at one or more of the credit reporting agencies.

We all hear the scary commercials on TV. You know the ones, where the bad guy steals your home by filing a simple piece of paper. The Register of Deeds in your county is required to file the notarized paper, once received in good condition, fraudulent or not. Or, the criminal puts mortgages and liens on your home, taking the money, and leaving you to cover the debts, even if it requires sale of the property.

While the commercials are designed to take some of your hard-earned cash, there are steps you can take that do not drain your wallet. The first and foremost action to be taken is to freeze your credit at every reporting agency. Fortunately, they make it easy.

Remember, they have ALL of your personal data, and any one of them may cause you trouble if they do not have a freeze on your data. That’s why many Americans freeze their own credit at the Big 3 agencies. This can be done online or by phone (at no cost to you). Once frozen, potential creditors may still gain access to your information, but they will first need to obtain your permission.

When you are taking these actions, remember to contact Innovis as well. They control the same data, and need to follow the same procedures.

Applying for a new loan or credit card requires a credit report, and the potential loan provider will need to obtain your score and credit history from one of the agencies. Find out which one the company prefers, and you can contact that agency to place a “thaw” on your data for a specific time. Once the process is completed, the freeze goes back into effect.

Remember that every person is treated individually by the agencies, so married people must perform the actions twice. We recently upgraded our status, including at Innovis, and the process was easy and free. Take advantage of that.

America is experiencing a cathartic moment in time. Common Sense, which we Baby Boomers grew up more or less taking for granted, has been eroding at an alarming pace for a few decades. Call it Political Correctness, CRT (Critical Race Theory), Equity, DEI (Diversity, Equity, and Inclusion), Affirmative Action, or ESG (Environmental, Social, and Governance), the powerful movement has infected American sensibilities, negatively affecting our investments. Lately, their popularity appears to be coming to a halt.

Socially Conscious investing has been popular for decades, as many mutual funds and ETFs (Exchange-Traded Funds) were developed to offer investors the ability to avoid holdings in the tobacco industry, defense weapons production, fossil fuels, and any number of individually distasteful arenas. Among the most recent were investments tailored to DEI proponents.

One after another, America’s publicly traded corporations are terminating their DEI programs. Until recently, public pressure to adopt these programs was difficult to ignore. Remember when Chief Justice John Roberts rendered his opinion that perhaps the best way to end discrimination was to “stop discriminating?” Doing the right thing does not need to be tailored to social fads.

Recent investment performance problems have raised eyebrows among investors, Wall Street practitioners, and government officials. Fiduciary Responsibility, which compels managers to do the best thing for shareholders, was violated, all in the name of Political Correctness (or whichever trendy term applies). Investors noticed, scrapped their underperforming assets, and took their investment cash elsewhere.

Just this week, American Airlines lost a court case alleging that the company’s 401(k) Plan underperformed due to an emphasis on ESG investing, resulting in reduced returns for their employees.

Lowering standards to accommodate feel-good policy acronyms leads to reduced performance. Demand for improved performance has induced corrective action, such as elimination of ESG and DEI, which are suddenly being dropped like proverbial hot potatoes.

Recently, Vivek Ramaswamy noted that “American culture has venerated mediocrity over excellence for way too long.” That did not sit well with all Americans, but evidence is all around us. As we re-enter a period of America First attitudes, individuals and corporations are seeking performance. Stock and bond markets will hopefully react positively to recent changes, and we all win.

As investment managers, we are constantly seeking improved performance. Our economic futures will all be enhanced as the country returns to the pursuit of excellence through common sense competition.

It’s no secret that the past four years have not been the most financially rewarding for a majority of Americans. Since resilience is a hallmark of our population, we are expecting a 2025 resurgence of optimism, with improving personal finances.

Investors have enjoyed a strong run-up in the stock market, likely based in optimism before the election. Now, stock valuations are pricey, interest rates are stubbornly high, and inflation remains a problem. Trump’s energy policies are designed to bring prices down dramatically. That alone cannot quench the inflationary fire, but it should serve as a launching pad for businesses and industries to improve their cost structures.

Other factors may also be contributing to reduced escalation in the cost of living. Commodity prices remain under pressure to go lower, and are not currently contributing much to the inflationary cycle. Labor rates have been rising, but at a much slower pace in the past year. Productivity has been rising at a solid pace, partially offsetting the effects of increasing labor rates. Taxes are now extremely unlikely to be raised on businesses and consumers in 2025. All these factors bode well for a continued lessening of inflationary prices.

COLAs (Cost of Living Adjustments) for Social Security Benefits are lower than we’ve experienced these past few years. Again, this will reduce excess demands on the economy from recent elevated government spending after COVID-19. Unfortunately, the lower COLA will be a drag on personal saving.

Economist Milton Friedman taught all of us (well, at least those who would listen) that inflation is, and will always be, a monetary phenomenon. Too much money chasing too few goods and services results in rising prices. Excessive government spending, without corresponding increases in output, is one of the primary driving forces of inflation. If the new Administration is successful in reducing government outlays, we will all benefit from stabilizing prices.

On an overall basis, the economy looks poised to enter a time of prosperity. Each of us needs to determine how we can best benefit from coming good times. For many, a good first step would be to reduce, and then eradicate, credit card debt. Several approaches to debt reduction are popularized in the media, and whichever method you choose, aim to eliminate these high-interest problems.

People with 401(k) accounts should increase their contributions as much as possible. We are fans of the strategy whereby any salary increases are directed into 401(k) accounts. Out of sight, out of mind.

IRA owners should max out 2024 deposits, if possible, before April 15, followed by making 2025 deposits. Personal savings have never been more important for a comfortable retirement.

Finally, consider working with a qualified, independent, financial advisor.

Christmas is upon us, and 2025 is only a few days away, so I am looking backward and forward for any positive personal financial possibilities that can help us spread some Holiday cheer. I recently found one. Actually, Adam found it and alerted me, so I am passing it along to our audience.

This one affects only a small handful of people, but those who are affected will appreciate the upshot. Personally, I enjoy news that can save money and taxes for anyone qualified to take advantage of another dysfunctional aspect of the U.S. Government. So, what have they done now? Or, perhaps a better question would be, What have they NOT done now?

Back in 2019, Congress passed the Setting Every Community Up for Retirement Act (SECURE 1.0), which was designed to improve the ability of Americans to provide for their own retirement incomes. The original law was filled with unclear and confusing provisions, especially pertaining to Required Minimum Distribution (RMDs) from Inherited IRAs. Most inheritors of IRAs lost the ability to “stretch” RMDs over their own lifetimes.

These changes only applied to IRAs whose original owners died after December 31, 2019. Due to the level of confusion this caused among beneficiaries and their advisors, RMDs were waived until Congress amended uncertain provisions.

Passed in 2022, SECURE 2.0 attempted to clarify remaining questions. However, SECURE 2.0 also failed to deliver complete, clear, and understandable results, and RMDs were again waived, this time until 2025. By then, Congress was to have laid down the law in a concise manner. And once again, the government failed to meet its self-imposed deadline.

SECURE 3.0 is in the works, and expected to pass in 2025 as the “final” product of lawmakers and the IRS. Just days ago, RMDs for affected Inherited Account owners were again waived, this time for 2025, and are now set to resume on January 1, 2026. Whether Congress gets it right this time remains to be determined.

Often, people who inherit IRAs would prefer not taking distributions, resulting in additional time for accounts to grow further in the tax-deferred IRA environment. Merry Christmas to these people, including a few of our clients. They have been fortunate enough to delay withdrawals for multiple years, improving their own retirement situations.

Happy New Year to all, whether or not you benefit from the failures of our elected officials to meet deadlines.

Listen carefully, and you can almost hear the national (and international) sigh of relief as 2024 winds down to an end, leaving in its wake a pile of economic hardship and damage. Strangely, economic reports and statistics flowing constantly from our bureaucrats and media sycophants seem to want us all to believe that our economy is excellent, our lives tidy and unharried, and the future bright. As Alfred E. Neuman repeatedly asked in Mad Magazine, “What, me worry?”

In the 1980s, we were introduced by Ronald Reagan to the question that changed everything. “Are you better off now than you were four years ago?” That question is getting a second wind, due to the vast majority of Americans who can only answer it in the negative.

How did you fare during the past four years? Many Americans are better off financially, as our stock market has been on fire, with records being set frequently. Investors with significant account balances have added wealth and security to their lives. Unfortunately, these people represent a relatively small portion of American families.

Regardless of where you stand financially today, it is time to approach the future with an eye toward making your own situation better in 2025. Almost everyone can adopt a positive attitude and make some changes. As much as I detest the notion of New Year’s Resolutions, this may be the time for one.

For instance, participants in company-sponsored retirement plans, such as 401(k) and 403(b) Plans, should make an effort to increase contributions and learn more about asset diversification. IRA savers should attempt to max out contributions for 2024 and 2025. Remember that you have until April 15, 2025, to add to your 2024 IRA.

Due to rampant losses and inflation in the insurance industry, your policy renewals may be coming in with significant double-digit increases. You are not helpless against these jolts to your cash flow. Take some time to do a complete analysis of your insurances, and shop around for better deals. There is no better and quicker way to pad your income than by reducing the cost for necessities. We recommend a discussion with a local independent insurance agent.

Each of us can do a better job with our 2025 finances, but it requires some reflection and analysis of our recent situations. The Holidays are a perfect time to figure out where we have been hurt by the economy of past years, and then develop better alternatives.

Getting some professional help may be timely. We recommend a free consultation with a Certified Financial Planner®.

Every year since I can remember, I have prepared a Christmas Wish List for Congress, and every year the theme seems to be the same. Last year, I wrote (modified slightly): Once again, I am driven to perform an annual exercise in futility by itemizing my Wish List for this (the outgoing 118^th) Congress. As always, there are many unresolved tax questions, unfinished “tweaks” to the Tax Code, and inconsistencies within the rules for Qualified Retirement Accounts. When contrasted with the few planned workdays left in the December Congressional schedule, it portends yet another “disaster of the undone.” As the remaining time for Congressional action wanes, it is largely discouraging to look back at the progress (or lack of same) made by the outgoing Congress toward last year’s list, starting with: Wish Number 1. Make the Trump Tax Cuts of 2018 permanent. In the Tax Cuts and Jobs Act of 2017 (TCJA), which took effect on January 1, 2018, both individual and corporate tax rates were dramatically lowered. Almost every taxpayer, every consumer, and scores of employees of large corporations benefitted greatly from more cash in their wallets. With the (re)election of Donald J. Trump, this is a near certainty. However, the usual group of elected lightweights in Congress are already explaining why this is not their #1 priority. The more things change, the more they stay the same, or so it seems. Wish Number 2. Inflation index tax items, including the SALT (State And Local Taxes) deduction limit, currently stuck at $10,000 per taxpayer (single or joint filers constitute one taxpayer). Prior to TCJA, taxpayers who itemize deductions could include 100% of their SALT expenses. Restrictions imposed by the 2018 Code  changes restricted that amount to the current $10,000. Now, it is time to at least acknowledge the simple premise that a couple filing jointly should receive twice the benefit of the deduction, updated annually for inflation. Wish Number 3. Have some mercy on tax preparers, tax planners, and taxpayers by giving us next year’s rules earlier this year. This is especially important when planning items such as Roth IRA Conversions, where there is no longer a chance to correct unintended errors after December 31. Congress is so derelict in wrapping up loose ends (especially in an election year) that Tax Code changes can actually bleed over to the next year, when it’s too late. I could go on, but it is the Holiday season. Van Wie Financial is fee-only. For a reason.

December is here, and if you are like most people, you are not quite sure how it snuck up on us so quickly. With Thanksgiving having occurred so late in November, remaining time is unusually short for planning and completing transactions prior to the New Year. Financially, we should all be tidying up what we can by planning for what we should do in the remaining days of 2024. We have compiled a short checklist of items that affect many Americans.

Lessening our 2024 tax bills (due next April) should be a top priority for every taxpayer. While 2024 IRA deposits can be made up to April 15, 2025, anyone planning a first-time 2024 Roth IRA contribution should consider opening that account in December, even if only with a small contribution. The reason for this is the 5-year period required for all Roth funds to become penalty-free. One full year is credited to the five-year history regardless of how many days the account was actually funded. The balance of the 2024 deposit can be made in early 2025.

People ages 50 and up are allowed to make additional (“catch-up”) IRA contributions each year, up to the $1,000 statutory (fixed) limit. While we were disappointed that this number did not increase for next year, it is nonetheless available to help our tax bills for 2024. (Catch-up contributions are meant to make up for lost time for late-starting savers, and apply to anyone of age.

Participants in 401(k)-type Plans make deposits through salary reduction deferrals from payroll, which can only be applied to the year of the actual deferral. Some employees may be able to increase their deferrals before the end of December to decrease taxable income, but hurry, as it is a busy time for HR Departments across the country. The maximum 2024 deferral is $23,000, and rises to $23,500 for 2025. In both cases, participants ages 50 and over by year-end may add up to $7,500 annually for “catch-up” contributions.

We should also note that participants ages 60, 61, 62, and 63 at year-end may increase their Retirement Plan “catch-up” contributions to a maximum of $11,250 for each of these years. While this represents a short period of working time, the extra contributions can only help, once retirement becomes a reality. Again, the purpose of these higher limits is to help late starters increase retirement income.

Medical Expenses are deductible, but only in excess of 7.5% of the taxpayer’s Adjusted Gross Income (AGI, usually located on line 11 of your Form 1040 Tax Return). Managing the timing of payment of medical expenses can reduce tax bills for itemizers. Pay this year if you can itemize deductions in 2024, or delay payment until 2025 if you will have a better opportunity then.

Tax Planning is truly a year-round activity. The more you know, the less income tax you may have to pay. What a great Christmas gift to yourself.

Van Wie Financial is fee-only. For a reason.

Our recent Blogs have outlined financial changes coming from government-controlled entities (including the U.S. Tax Code, Social Security, and Medicare, especially as Cost-of-Living Adjustments (COLAs) are unequally applied to each. This past week brought further data releases, in the form of Medicare premium increases for both the Base Cost and IRMAA add-ons. IRMAA stands for Income-Related Monthly Adjustment Amounts, which are applied to many Medicare enrollees, based on their income.

Last week, we made a simple observation. Every year, the government demands a larger portion of our purchasing power.

This week, we are able to offer further evidence to support our viewpoint, using just-released adjustments (increases) to Medicare premiums. Instead of matching the 2.5% Social Security COLA, Medicare premiums are increasing about 5.9%, and deductibles paid out-of-pocket before benefits kick in are rising nearly 7.1%. Both erode our purchasing power on a monthly basis.

On the Income side of our primary Social Program, Social Security, we explained that the COLA for Social Security monthly benefit payments would be 2.5% for 2025. On the Expense side, Medicare Part B and Part D premiums for enrollees are usually extracted by automatic deduction from Social Security monthly benefits. For most people, these costs remain hidden, as relatively few Americans regularly visit the Social Security website.

Doing some simple math in our personal income/expense ledgers, we find that net benefits to our nation’s senior citizens have once again been diminished (with the difference going directly to Uncle Sam). So predictable, and so egregious.

COLAs have long been unfairly applied, in our opinion. However, among the most egregious mandates in this arena are IRMAA surcharges for Medicare Part D Prescription Drug Plans. Social Security recipients who do not even subscribe to Part D, but have incomes above government-prescribed limits, are assessed Part D IRMAA monthly surcharges. These taxpayers receive zero benefits from the Plan. In whose world does this sound fair and reasonable?

Once again, America’s “seasoned citizens” will experience a setback in their lifestyles. When costs to taxpayers are increased through clandestine transactions, such as IRMAA surcharges, our lifestyles quietly continue to ebb.

This message is hardly in the spirit of the Season, but our intent is always to provide current and accurate information, whether positive or negative.

Happy Thanksgiving to all.

Van Wie Financial is fee-only. For a reason.

As an American taxpayer, financial planner, and part-time radio host, one of my self-appointed responsibilities has been to enlighten our audience as to upcoming financial changes that will impact nearly everyone. This time of year, Congress and certain Departments of the Administration are busily preparing annual changes to taxes and our massive Social Programs, including Social Security and Medicare. My objective, one that I have been pursuing for years, is to disseminate information as soon as it is made available to the public.

Before I summarize changes that were released this week, I will render my long-held opinion, and I expect few will be surprised with my conclusion.

Every year, the government demands a larger portion of our purchasing power.

One of the main tools used by government to fleece the public is the annual Cost-of-Living Adjustment, or COLA. Understating the COLA, as it gets applied to Social Security benefits, reduces purchasing power for the 70+ million recipients of monthly Social Security benefits. This practice has been so pervasive that Americans have lost 30% of Social Security Benefits’ purchasing power since the year 2000. The paltry 2.5% increase in Social Security benefits is a ridiculous understatement of the actual cost of living we all experienced over the past year. We consider misuse of the COLA.

COLAs can also be used to increase our costs, providing a double whammy for taxpayers. This week, we were treated to another data set exemplifying this form of financial manipulation. The subject is Medicare premiums, which are rising by 5.9% (the government stated Medicare COLA), more than double our Social Security monthly benefit increases. Since Social Security recipients have Medicare premiums deducted from their monthly benefits, our net benefits suffer. Adding insult to injury, the Medicare Part B deductible will increase a whopping 7.1% for 2025, further reducing our purchasing power.

Once again, America’s “seasoned citizens” will experience a setback in their lifestyles.

Van Wie Financial takes great pride in our willingness and ability to keep our audience informed of changes as soon as they are released. We take no pleasure, however, in our analyses when they lead to inevitable conclusions.

On a positive note, there is a pinpoint of light coming in 2025. Tax brackets have been broadened by about 2.8%. Lower tax brackets will apply to more of our income next year. Also, President-elect Trump has proposed elimination of taxes on Social Security benefits. Fun to imagine, but don’t hold your breath.

Van Wie Financial is fee-only. For a reason.

Uncertainty is the bane of the stock market, as well as tax planners and investors everywhere. Throughout the 2024 Presidential Election Cycle, prognostication became increasingly difficult as proposals, trial balloons, polls, and candidate swaps supplied a plethora of conflicting concerns. Nothing was certain, planning was difficult, and markets were understandably volatile.

Fortunately, the election is (virtually) over, giving markets and people time to assess results and refine financial planning prior to year-end. In the 2024 election, one of the main uncertainties revolved around the future of the 2017 “Trump Tax Cuts.” Due to arcane Senate rules, our current low rates are set to sunset after 2025, at which time Personal Income Tax Rates would automatically rise.

For purely political reasons, election results would pave the way for either continuing lower rates or the expiration of those rates with the resultant tax increase. With election results now known, tax rates will most likely not rise in 2026. This opens up a new discussion regarding tax planning, and especially the viability of Roth IRA Conversions. Here’s a look at our thought process.

Following introduction of the Roth IRA in the 1997 Taxpayer Relief Act, Roths have been helpful for many American taxpayers, due to forever-untaxed withdrawals offered to account owners who follow simple rules. People in low tax brackets could save for a future in which tax rates would be higher, and their withdrawals would remain tax-free.

Converting Traditional Retirement funds to Roth status creates a 1-time taxable event, but the long-term tax-free status can be very valuable. This is especially true in the face of impending higher tax rates, which would have been the case if our election results were different. Our clients have been very interested in the concept, as they should be. However, the immediacy of the discussion has been reduced because of the steadiness of tax rates. In fact, Trump (47) has expressed a willingness to cut rates even further.

Tax and Investment Planning shrouded by uncertainty can lead to expensive (and irreversible) actions by investors. As we settle into year-end planning, pressure to take some actions is reduced, or even eliminated. Most of us are relieved and feeling less pressured.

Naturally, Tax Planning is a complex and multi-faceted process. As more decisions are made and published, we face reduced uncertainty, making planning considerably less complex. We are watching for any and all details of further changes coming to the Tax Code. After all, the only thing certain about taxes is change.

All in all, early data presents a mixed bag. We’ll keep you updated.

Van Wie Financial is fee-only. For a reason.